Minnesota’s New Independent Contractor Law: A Nightmare for Homebuilders?

A new law in Minnesota has sent shockwaves through the construction industry, leaving many homebuilders worried about the future of their businesses. The law, passed in May 2024 as part of a massive omnibus bill, significantly changes how independent contractors are classified, and the penalties for misclassification are severe.

What’s the Big Deal?

At the heart of the issue is a new 14-factor test to determine whether a worker is an independent contractor or an employee. This test is incredibly complex and ambiguous, making it difficult for homebuilders to know for sure whether they are in compliance. Even minor, unintentional errors could result in hefty fines and even criminal charges.

Why is this Law So Problematic?

• Vagueness: The law’s language is unclear, leaving room for interpretation and potentially arbitrary enforcement. This uncertainty makes it challenging for homebuilders to navigate the new rules with confidence.
• Excessive Penalties: The fines for misclassification are disproportionately high. For each misclassified worker, a contractor could face up to $10,000 in penalties, plus additional fines for other violations. These costs could quickly add up, jeopardizing the financial stability of small and medium-sized homebuilding businesses.
• Lack of Due Process: The law was passed as part of a massive omnibus bill with little public input or debate opportunity. This rushed process raises concerns about transparency and fairness.

Stay Informed – BAM will update you on our Actions on your Behalf

This is a developing story, and we will continue to provide updates as they become available. In the meantime, homebuilders should familiarize themselves with the new law and seek legal advice if they have any questions about how it applies to their businesses.